Saudi Arabia closes $3bn August sukuk program

The National Debt Management Center has closed the August 2021 issuance under the Saudi government’s SAR-denominated sukuk program. The size was set at SR11.358 billion ($3 billion), NDMC said in a statement on Tuesday.

The issues were divided into three tranches: A SR2.508 billion tranche, which matures in 2029; a SR4.485 billion tranche, which matures in 2033 and a SR4.365 billion tranche, which matures in 2036.

Saudi Arabia had approximately SR854 billion debt outstanding by year end 2020, of which 59 percent are riyal-denominated and 41 percent in foreign currency, says NDMC on its website.

As per the 2021 Saudi budget, the deficit funding requirement in 2021 is estimated to be SR141 billion.

Despite a record budget deficit in 2020, it dropped by 92 percent in the first half of 2021 and there has been a recent improvement in the Kingdom’s credit rating.

Higher oil prices at times in recent months will also aid the healing of the Saudi economy from the effects of the coronavirus disease (COVID-19) pandemic.

The Ministry of Finance plans to raise gross debt around SR124 billion and keep debt raising split between domestic and external debt largely unchanged from 2020, to fund this deficit.

The form of funding will be a mix of conventional bonds, sukuk and government alternative financing, and the remaining expected deficit will be financed through government reserves, according to NDMC.

Based on the 2021 budget statement, the year-end 2021 target portfolio is expected to reach about SR937 billion, which translates into about 32.7 percent debt-to-GDP ratio and a 75-85 percent fixed-rate/15-25 percent floating-rate interest, which is in line with the government’s public debt management objectives, it says.